The Bank of Ghana (BoG) has directed regulated financial institutions to reduce their Non-Performing Loan (NPL) ratios to below 10% by December 2026, as part of efforts to strengthen the banking sector and improve access to credit for businesses and households.
The BoG Governor, Dr Johnson Pandit Asiama, said although banks had made significant progress in reducing bad loans, the current level remained a major concern and continued to constrain the sector’s ability to provide more credit to the economy.
Speaking at a forum on “Restructuring Distressed Companies: Non-Performing Loans (NPLs) and Post-Commencement Financing,” Dr Asiama said the banking sector’s NPL ratio had declined significantly but was still above the level considered healthy for a resilient financial system.
He disclosed that the industry’s NPL ratio fell to 16.1% in June 2026 from 23.1% recorded in June 2025, representing a notable improvement in asset quality.
However, he cautioned that the decline alone was not enough to resolve the long-standing challenge of bad loans.
“The industry’s non-performing loan ratio has declined to 16.1% as of the end of June this year, down from over 23% a year ago, while the capital adequacy ratio stood at 20.4%. Capital at that level gives banks the room to take considered risks. But while this represents progress, it is not sufficient,” he said.
Dr Asiama said the BoG’s regulatory measures required every regulated institution to bring its NPL ratio down to no more than 10% by the end of December 2026.
He said banks were expected to achieve the target through stronger credit appraisal systems, credible NPL reduction strategies, improved loan recovery mechanisms and the write-off of fully provisioned loans with no realistic prospects of recovery.
The Governor explained that high levels of non-performing loans had broader economic consequences because they locked up bank capital, increased recovery costs and reduced the ability of financial institutions to extend credit, particularly to small and medium-sized enterprises.
“High non-performing loans tie up capital. They raise recovery costs and restrict new credits, most severely for smaller and higher-risk borrowers. Reducing them is therefore not merely a supervisory concern. It is part of Ghana’s development agenda,” he added.
Banking sector strengthens balance sheet
The decline in NPLs coincided with a strong expansion in the banking sector during the first half of 2026, reflecting improved financial stability and stronger balance sheets.
Total assets of the banking industry grew by 30.7% year-on-year to GH¢502.4 billion in June 2026, supported by increases in deposits, borrowings and shareholders’ funds.
The sector’s solvency position also improved significantly, with the Capital Adequacy Ratio (CAR) rising to 20.4% in June 2026 from 10.6% in June 2025.
The stronger capital position provides banks with increased capacity to absorb potential shocks and support lending activities.
Despite the improvements, the BoG maintained that further action was required to address the remaining stock of bad loans and ensure that financial institutions could effectively support economic growth through increased credit delivery.
